Follow up with article "Too many MALLs and too much competition" posted on 16th August 2016, this is a great call to freeze on new application to build shopping centres. As its over supply in terms of mall and retails. Even retailers will have lots of tough time as total consumer in each mall is getting lesser and lesser. Rental of mall is high and its tough time for the retailers at the moment. If this is not freeze for now, you will see a lot of "Ghost" Mall sooner or later. This is a necessity measure.
This article first appeared in The Edge Malaysia on Aug 29, 2016
Call for freeze on new malls in KL and Selangor
MALL owners and operators are urging the local authorities in Selangor and Kuala Lumpur to impose a two-year freeze on new applications to build shopping centres as a way to overcome the current oversupply of retail space.
A dramatic increase in retail space per capita, delays in mall openings, closures of malls and malls put up for sale are signs of the oversupply situation.
Malaysia Shopping Malls Association (also known as Persatuan Pengurusan Kompleks Malaysia or PPKM) adviser H C Chan (pictured) says the market is already stressed, and with another 30 million sq ft of retail space coming in, the situation could worsen.
“Supply is still coming in very strongly but demand is restricted to a population of 30 million who have very limited purchasing power,” he tells The Edge in an interview.
National Property Information Centre data shows that retail space per capita is expected to rise — 16.2 million sq ft of incoming retail space and another 11.08 million sq ft is being planned. As at end-2015, there was 148.85 million sq ft of retail space nationwide.
Moreover, while the average occupancy in KL and Selangor is 82% and 79% respectively, there are shopping centres that register far-below-average occupancy.
“The oversupply situation is not helping the developers and retailers. There’s too much retail space chasing too few retailers. It is a lose-lose situation,” Chan says.
Take for example, a chain store operator. More malls in an area means the shoppers will be spread out, hence it will not make business sense for the retailer to open outlets in all these malls as it would only mean higher operating costs, he explains.
It is worth noting that international real estate consultant Knight Frank’s research reveals that the expansion in retail space over the past five years has outpaced population growth. KL’s population increased at a compound annual growth rate (CAGR) of only 0.9% between 2010 and 2015 while retail space grew 5.6%. Meanwhile, Selangor’s population grew at a CAGR of 3% while retail space increased 5.9%.
Retail space per capita in KL rose to 16.62 sq ft last year from 13.69 sq ft in 2010, while in Selangor, it increased to 5.52 sq ft from 4.99 sq ft.
Imposing a freeze on the development of commercial properties is not unheard of. Early this year, Dewan Bandaraya Kuala Lumpur (DBKL) announced a moratorium on approvals for new hotel licences in the city. Effective March 4, it covers all categories of hotels. DBKL said the decision was made as it felt that there were sufficient rooms — more than 56,000 (built and approved for development) — to cater for demand for at least a year. Furthermore, hotel operators have been seeing declining occupancy and room rates.
In 2011, the authorities of Jakarta announced a moratorium on the construction of malls of over 5,000 sq m following recommendations by developers in the Indonesian capital. The authorities cited the unoccupied units in existing malls as the reason for the move. They did not approve any new mall application for 1½ years.
Going further back to 2004, Malaysia placed a five-year freeze on the opening hypermarkets in certain areas — KL, Shah Alam,Petaling Jaya, Penang island and Johor Bahru. The number of hypermarkets in these areas then was said to have reached saturation point.
Chan suggests that the local authorities hold discussions with stakeholders to assess the situation before making a decision. A blanket ban is not necessary, he says. PPKM represents 90% of the mall owners and operators in the country. There are more than 400 malls nationwide.
Chan, who is also the immediate past president of PPKM, opines that a two-year moratorium should suffice.
“Those [who have] already been issued development orders [by the local authorities] should be allowed to proceed with their projects. The freeze should be for new or future applications,” he adds.
Malaysia saw an exponential increase in the number of malls in the 30 years to 2010. The number of shopping centres grew by about 100 every 10 years, bringing the total to more than 300 in 2010. But between 2011 and 2015, the number of malls shot up by 200.
Chan says there are three main reasons for the surge in the number of malls. Firstly, developers are shifting from building residential properties to venturing into property investment — building malls.
“Historically, malls have been a lucrative and attractive sector,” he says. And now, developers want to strike a balance between property development and property investment, hence the building of more malls, he adds.
Secondly, developers are coming up with projects that comprise residential and commercial components. “It is [now] common to see developments featuring three or four-storey retail podiums and three or four blocks of residential or office units, or a hotel,” says Chan.
He adds that from an economic perspective, integrated developments allow developers to maximise profit. “These days, very few developers will build just a shopping mall with car parks.”
Thirdly, urbanisation and growing affluence resulted in a need for more shopping malls. “Of the 150 million sq ft of retail space in the country, 50% is in Kuala Lumpur and Selangor,” Chan says. “However, only a third of the population live in these areas.”
By looking at these three news referring from www.theedgeproperty.com.my, a great connectivity of transit system will complement each other and further improve the convenience of the consumer. Not only that, it will reduce the travelling time further. Its the move that going to further improve the country transportation system. Even Ho Chin Soon says do not underestimate the potential of HSR.
Local connectivity needed to complement HSR development
KUALA LUMPUR (Aug 27): Although the Kuala Lumpur-Singapore High Speed Rail (HSR) could be a great boost to improve Malaysia’s trans-border transportation system, industry players and consultants suggested that private and public sectors need to collaborate to enhance the “real connectivity” of various transportation systems to allow business opportunities to grow.
Ho Chin Soon Research chairman Ho Chin Soon said HSR will change the way people travel and do business as it shortens the time from Kuala Lumpur to other states in the southern region all the way to Singapore.
“The improved connectivity will move the central of gravity from the central region to other places, such as how the highway connectivity has shifted the central gravity from Petaling Jaya to Puchong, and now HSR will expand the golden triangle areas to open up more opportunities in older places like Bukit Bintang,” he said.
However, BBCC Development Sdn Bhd CEO Datuk Richard Ong said the connectivity between all public transportation systems, such as Mass Rapid Transit (MRT), Light Rapid Transit (LRT) and public buses also need to be improved to effectively connect people from HSR stations to other locations.
“BBCC will set an example by connecting MRT, LRT and the monorail system as well as provide greater convenience to the commuters who travel from or to HSR stations,” he said during the panel discussion at TheEdgeProperty.com’s “Symposium on Kuala Lumpur-Singapore High Speed Rail 2016”.
Ho and Ong as well as Savills Malaysia executive chairman Christopher Boyd were the panellists for the panel discussion titled “HSR — The Big Idea”.
The panel discussion was moderated by TheEdgeProperty.com managing director and editor-in-chief Au Foong Yee.
The symposium was organised by TheEdgeProperty.com and supported by The Edge Malaysia. The presenting sponsor is Bukit Bintang City Centre (BBCC).
Apart from connectivity, Ong said the requirements of young buyers and the working population are getting more sophisticated, and developers need to be creative to integrate more elements to the developments to cater to their needs.
“In a market where oversupply has become an issue, developers need to add in more elements — such as entertainment and recreation — into the design to cater to their needs,” he said.
Although many people are looking forward to the opportunities in the property market due to the HSR, Boyd reminded that infrastructure development is a long-term development which will not see an explosion in value in the short term.
“Investors could tap on the opportunities to invest in properties along the HSR line, but they must also bear in mind, there will not be an overnight booming effect even after the HSR starts operation. Based on the experience of countries which already have HSR, the rental yield growth and capital appreciation will take time to see the impact,” he explained.
BBCC invests RM30 mil in transit hub
KUALA LUMPUR (Aug 27): Believing that connectivity is absolutely vital, Bukit Bintang City Centre Development Sdn Bhd (BBCC) said the developer will be investing RM30 million into creating the central transport hub located within the development, said its chief executive officer, Datuk Richard Ong.
Speaking at TheEdgeProperty.com’s inaugural “Symposium on Kuala Lumpur-Singapore High Speed Rail 2016”, Ong said the developer is going to do a lot more besides banking in on the existing transportation system that surrounds BBCC, the former Pudu jail site.
According to Ong, the transit hub will connect the Light Rail Transit (LRT) station, the future Mass Rapid Transit (MRT) station and the monorail station.
“This is something we’re doing on our own for the benefit of commuters. It will cost us RM30 million, but we want seamless connectivity from the stations for everyone who comes to BBCC or live within BBCC.
“BBCC counts a lot on connectivity. Forget about cars, the future is going to be the rail lines including the High Speed Rail. You have the MRT connected to the monorail and LRT right in front of BBCC.
“If you take the LRT you can reach Chan Sow Lin where you can transit and then reach the HSR located at Bandar Malaysia. Connectivity is very important not only in the Klang Valley but beyond that, to Singapore and even the whole world,” said Ong.
Ong’s presentation topic titled “The new heartbeat of Kuala Lumpur” touched on how BBCC is set to be the new heart of Kuala Lumpur.
The 19.4-acre project with a gross development value (GDV) of RM8.7 billion is located at the intersection of Jalan Imbi and Jalan Pudu, also dubbed as the Golden Triangle of KL. It is being developed by a consortium comprising UDA Holdings Bhd, Eco World Development Group Bhd and the Employees Provident Fund in a 40:40:20 share structure over a period of between 8 to 10 years.
The integrated development will comprise a 1 million sq ft retail mall, lifestyle street, entertainment hub, hotel, 350 units of 715 sq ft to 1,423 sq ft offices within the Strata Office Tower, six luxury residential towers, an 80-storey Signature Tower, parks and gardens, and finally the transport hub.
Organised by TheEdgeProperty.com, the symposium titled “Where to invest — Don’t miss the boat” is supported by The Edge Malaysia with Bukit Bintang City Centre as the presenting sponsor.
Do not underestimate the potential of HSR intermediate stations, says Ho Chin Soon
KUALA LUMPUR (Aug 27): Ho Chin Soon Research Sdn Bhd chairman Ho Chin Soon has reminded property investors not to underestimate the potential of areas where the intermediate stations of the Kuala Lumpur-Singapore High Speed Rail (HSR) link are located.
Speaking during his presentation "Hot spots along the alignment: Where are the opportunities?" at TheEdgeProperty.com’s “Symposium on Kuala Lumpur-Singapore High Speed Rail 2016” themed “Where to invest — Don’t miss the boat!” today, Ho pointed out that the HSR is expected to attract 17.6 million potential users and the number is poised to increase at a pace of 2.9% per annum to about 24 million in 10 years.
Furthermore, when the government of Malaysia and Singapore signed the memorandum of understanding (MOU) for the 350km rail link last month, some developers have started to acquire land near the proposed stations while developers with projects near the proposed stations are already promoting their projects with the HSR as a major selling point of their projects, he added.
Ho said the HSR, which will have a terminus in Bandar Malaysia and six intermediate stations in Putrajaya, Seremban, Ayer Keroh, Muar, Batu Pahat and Iskandar Puteri, offers a lot of opportunities for Malaysian real estate investors including property developers.
"There are land purchase opportunities, for developers looking for development land near HSR stations. Look for plantation land, whereas individual investors should look for small holding land."
He revealed that some well-known developers already have land near the upcoming HSR stations, such as Sime Darby Bhd (Seremban station) and the Lion Group, Bellworth Group, Encorp Bhd and MTD Capital Bhd with lands in Ayer Keroh.
While revealing the land ownership and opportunities for land purchases surrounding the proposed HSR stations, he also urged investors to not underestimate the potential of each intermediate station.
For example, Pagoh or Muar stations offer small holdings and plantation land purchase opportunities, he noted.
Ho added that Ayer Keroh — another intermediate station of the HSR — will also benefit from the HSR mega project that will shorten the travel time from Ayer Keroh to Bandar Malaysia.
The symposium, which was held at Sunway Putra Hotel, Kuala Lumpur, is organised by TheEdgeProperty.com and supported by The Edge Malaysia. The presenting sponsor is Bukit Bintang City Centre.
This is expected since years back with so many malls being build within a short distance. Take into example of PJ, there have Paradigm Mall, One Utama, Ikano, E-Curve, Encorp Mall, Citta Mall, Evolve Mall etc.
As for Sunway and Subang area, there have Sunway Pyramid, Subang Parade, Empire Shopping Gallery Subang, SS15 Courtyard, Main Place USJ, One City, The 19 USJ City Mall, The Summit (Under Renovation), Subang Avenue, USJ Wholesale CIty Mall, da:men and etc
The competition is so stiff for the retailers, business is tougher to survive. If retailer cannot survive, so do the malls. Just like last week case, Perda City Mall in Bukit Mertajam, Penang, suddenly shut down after a mere 18 months in business.
If there is more malls to come, expect more of this to happen until economy is turning better.
The following article referred from The Edge Malaysia on Aug 8, 2016 written by Vasantha Ganesan
More shopping centres to go on sale
WITH saturation and lower retail sales, the number of shopping centres that have been put up for sale or have been sold has been visibly higher over the past nine months. And this trend is expected to continue.
Data tabulated by The Edge (see table) reveals that during the period, the combined value of shopping centres advertised for sale, reported to be for sale or confirmed sold was an estimated RM3 billion. The real value could be much higher as many deals did not require an announcement to be made or the agent may have signed a non-disclosure agreement while seeking a buyer.
Lek Chay Tong, executive vice-president of research and consultancy at Savills (Malaysia) Sdn Bhd, attributes the rise in the number of shopping centres put up for sale to increased speculative mall development in the past five years.
Once mall development becomes speculative, oversupply kicks in, he tells The Edge, adding that this led to over-geared property developers disposing of their mall assets.
“Many malls have been developed by developers and not mall owners. These developers do not have (any) mall management expertise and thus, they prefer to sell (their malls) off,” says Stanley Toh, director of valuation at real estate agency firm LaurelCap Sdn Bhd.
Toh explains that in a mixed development, the developer’s profit is hidden in the mall portion of the project.
“For example, in an integrated development with serviced apartments and a retail mall, the apartment blocks are sold and the developer makes his profit from this. However, because he still retains the mall, the profit is stuck in the mall portion. In order to realise the profit, the developer would have to sell the mall,” he says.
“Going forward, we can expect to see more retail asset deals,” Toh adds.
He says previously, developers who built malls would sell them with ease as they had ready buyers. Often, the sale would be concluded quietly and go unnoticed. “But in this slow market, we are seeing owners hiring agents to sell the properties as it is more difficult to divest the properties (themselves).”
Toh adds that many of the malls are largely vacant or have poor rental rates, which translates into poor yields. In some cases, the malls are virtually empty.
Whether a mall vendor can find a buyer hinges on the selling price. “Most retail mall purchasers are either real estate investment trusts or foreign funds. Mall investors are looking at a net yield of 7%. With the current depressed rental rates, in order to hit a 7% net return, the selling price has to be lower as well,” he says. This does not work in favour of the seller.
Generally, good malls that have a market are not for sale, and malls that are up for sale do not have a market, says Savills Malaysia’s Lek. In such an environment, it is not unusual to see owners of successful malls saying, “at the right price, everything is for sale”.
Large mall developers that want to carry on with their project need to seek an alternative in the current soft property market. “For some of the larger malls measuring over one million sq ft in net lettable area, the developers are looking for joint-venture partners, specialist operators or, in some cases, other sources of funding. That’s because the malls are finding it difficult to achieve high rent in the first term (as competition has intensified) to justify their infrastructure cost and cost of construction,” says Lek.
Phase 1 of MRT Line 1 undergoing mechanical testing, 86% complete
Refer from Theedgeproperty
KUALA LUMPUR (Aug 2): Mass Rapid Transit Corp Sdn Bhd (MRT Corp) said it is currently undertaking the mechanical and electrical system works of Phase 1 of the MRT Sungai Buloh-Kajang (SBK Line or MRT Line 1), which is on track to meet its targeted completion by end-2016.
MRT Corp chief executive officer Datuk Seri Shahril Mokhtar (pictured) said 86% of the first phase of the line has been completed, with trial runs to start in October.
"We now have only a few months to Phase 1 of the SBK Line between the Sungai Buloh station and the Semantan station becoming operational by end of this year. Progress for the line is now at 86%.
"The tests and trial runs will not involve members of the public, as we have to be absolutely sure that everything works fine before we open the line to the public," he said.
Meanwhile, Phase 2 of the SBK Line, comprising the underground and southern elevated sections, will be ready for operations by July 2017.
For the MRT Sungai Buloh-Serdang-Putrajaya line (SSP Line or MRT Line 2), Shahril said the contract awards are progressing according to schedule.
"To date, we have awarded a total of 21 work packages. Work has already begun in several locations involving activities like land clearing and utilities piloting," said Shahril.
Shahril was speaking to reporters today, during MRT Corp's Hari Raya Open House celebration.
The group also presented a RM5,000 cheque to Yayasan Chow Kit, a foundation that provides assistance to those in need via its 24-hour crisis and drop-in centre that provides hot meals, activities and social services.
KL airbase relocation works give TRX City a boost
R from www.theedgeproperty.com.my/content/829005/kl-airbase-relocation-works-give-trx-city-boost
TRX City Sdn Bhd (formerly known as 1MDB Real Estate Sdn Bhd) saw a net profit of RM380.6 million in the financial year ended March 31, 2015 (FY2015). But it could have been a lot less had it not been for the income from the relocation of the Kuala Lumpur Air Force base (Pangkalan Udara Kuala Lumpur or PUKL).
The company posted a net profit of RM858.3 million in the previous year.
According to its CEO Datuk Azmar Talib, TRX City has three projects, including the development and upgrading of facilities for the Royal Malaysian Air Force, Rejimen Artileri Diraja and Royal Malaysian Police Air Wing.
“In FY2015, Tun Razak Exchange (TRX) was in the midst of earthworks and infrastructure works, and we are finalising the Bandar Malaysia project master plan. Both projects did not contribute any revenue to the TRX City group. The PUKL project, meanwhile, was progressing well into the construction stage and contributed revenue of RM478 million,” Azmar says in an email reply to The Edge.
The group has signed four deals with local and foreign companies for the development of TRX and Bandar Malaysia since 2014.
According to TRX City’s FY2015 financial report obtained by The Edge, the real estate arm of the soon-to-be-closed 1Malaysia Development Bhd (1MDB) reported lower changes in the fair value of its investment properties during the 12-month period ended March 31 last year, which resulted in the lower profits.
The lower changes were probably due to the group reclassifying its investment properties into land held for property development as it has started developing some portions of the land in Jalan Tun Razak.
During the period, TRX City disposed of the freehold tract in Sungai Besi to its then wholly-owned subsidiary Bandar Malaysia Sdn Bhd for RM4.2 billion. Sixty per cent of Bandar Malaysia was acquired by a consortium comprising Iskandar Waterfront Holdings Sdn Bhd and China Railway Engineering Corp (M) Sdn Bhd late last year for RM5.28 billion.
While TRX City was supposed to be the real estate developer of the strategic investment fund, actual works on the site, especially at TRX, commenced only about a year ago. The company has awarded two infrastructure contract packages to WCT Holdings Bhd — in 2013 and 2015.
When The Edge visited the TRX site last Wednesday on the group’s invitation, infrastructure works were in full swing, with about 470m of the ingress-egress tunnel connecting the project to Jalan Tun Razak almost completed.
Major earthworks and other utilities infrastructure work are also being carried out, while construction of the underground floors of the 90-storey Signature Tower has been completed. Mulia Group is the developer of the tower, which is set to become the anchor of the financial quarter of TRX.
Despite some progress on the site, TRX is far from becoming a revenue-generating unit for TRX City.
According to Azmar, due to the nature of the project as a property development, revenue and profit are recognised using the percentage of completion method, in compliance with the Malaysian Financial Reporting Standards.
“TRX City entered into joint ventures and land sales transactions with Lendlease on March 19 last year. As at March 31, 2015, the agreement was subject to the fulfilment of conditions precedent, and neither revenue nor profit were available to be recognised.
“Going forward, as the development activities of TRX intensify, the project is expected to contribute substantially to TRX City’s revenue and profit,” Azmar says in the email reply.
It is thus certainly not by chance that the group is undertaking the relocation of the Kuala Lumpur airbase and the development of eight sites to house the armed forces throughout the country.
To recap, in June 2011, 1MDB and the federal government signed a development and relocation agreement for PUKL for a total project cost of RM2.7 billion. Six million sq ft of new facilities will be built in eight different locations for the armed forces, which is three times more than the old airbase floor area.
In return for 1MDB undertaking the construction of the new bases, the strategic development fund was given a cash payment and land. This includes the 480-acre Sungai Besi airport tract, to be developed into Bandar Malaysia, worth RM1.6 billion.
The federal government has agreed to pay the remaining RM1.1 billion in construction cost upon the actual cost being incurred. Any cost overruns or penalties will be borne by 1MDB, with the cost to the federal government remaining at RM2.7 billion.
Subsequently, 1MDB appointed Perbadanan Perwira Harta Malaysia, a unit of Lembaga Tabung Angkatan Tentera or the Armed Forces Fund Board, as the sole turnkey contractor to undertake certain construction works in the relocation of the Kuala Lumpur airbase. It is unclear what “certain construction works” entail.
Azmar says the relocation is ongoing, with an overall completion progress of 50%. “There are eight sites and each has its own schedule.”
Based on TRX City’s 2015 annual report, the group recorded revenue of RM478 million in FY2015, derived mainly from the construction contracts awarded by 1MDB to undertake the relocation of PUKL.
TRX City has raised a substantial amount of money through debts to part-finance the relocation of the airbase, as part of the Bandar Malaysia development agreement. On Dec 20, 2013, the group accepted a RM550 million term-loan facility to partially finance the relocation works.
The term loan was for a tenure of a year with a bullet repayment of the principal sum on Jan 7 last year. TRX City had redeemed the term loan in FY2015, which resulted in its cash and cash equivalents plunging to RM11.2 million from RM555.66 million in the preceding year.
Besides the term-loan facility, the group also issued RM2.4 billion (nominal value) under a sukuk murabahah programme. The proceeds have been utilised to part-finance the cost of the relocation project and to fund its working capital requirements.
Indeed, revenue from the relocation and development of the airbase has been keeping TRX City afloat as the development of TRX has not contributed much revenue or profit to the group.
This is because the disposal of land in TRX to investors is subject to the master developer completing the required infrastructure. According to a TRX City official, some of the land deals the company has entered into with investors have long-term staggered payment periods.
Besides Lendlease, which is developing a lifestyle quarter with TRX City, other companies that have purchased tracts within TRX include Lembaga Tabung Haji (1.6 acres for RM177.5 million) and Affin Bank Bhd (1.25 acres for RM255 million).
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